OREANDA-NEWS. March 28, 2016. Fitch Ratings has assigned a 'AAA' to the following general obligation (GO) bonds to be issued by Guilford County, NC (the county):

--\\$95 million GO refunding bonds series 2016A.

The bonds are expected to sell April 6 via negotiated sale. Bond proceeds will be used to refund all or a portion of the GO public improvement bonds series 2009A and GO refunding bonds series 2010C for debt service savings.

In addition, Fitch has affirmed the following ratings:

--\\$676.71 million GO bonds at 'AAA';
--\\$16.85 million limited obligation QSCBs (LOBs) issued by Guilford County Public Facilities Corporation at 'AA+'.

The Rating Outlook is Stable.

SECURITY

The GO bonds are general obligations of the county, to which its full faith and credit and unlimited taxing power are pledged.

The LOBs are payable by lease payments subject to annual appropriation, and a deed of trust against certain public school assets of the county.

KEY RATING DRIVERS

SOLID FINANCIAL FLEXIBILITY: Positive financial operations and healthy reserve levels are a result of prudent fiscal practices and conservative budgeting. Liquidity is strong.

TRANSITIONING ECONOMY: The county's economic base continues to transition from a furniture and textile based manufacturing core to an increasingly diversified manufacturing base. Economic indicators are moderately below national averages.

LIMITED LONG-TERM LIABILITIES: Debt, fully-funded pensions and other post-employment liabilities do not pressure the credit. Manageable future debt issuance plans will allow the county to maintain the current profile.

COUNTY MITIGATES VARIABLE RATE EXPOSURE: The county's somewhat elevated debt service reflects its rapid pay-out rate. The debt profile contains exposure to variable-rate debt and derivatives although the county is lessening this risk by reducing its variable rate exposure and conservatively budgeting interest expense.

APPROPRIATION RISK ON LOBS: The 'AA+' rating assigned to the LOBs, one notch below the county's GO rating, reflects appropriation risk mitigated by Fitch's assessment of the essentiality of the public school assets pledged to bondholders.

RATING SENSITIVITIES

HEALTHY FINANCIAL FLEXIBILITY: The Stable Outlook reflects Fitch's expectations that the county's financial position will remain sound through the economic cycle. The rating would be sensitive to any material weakening of the county's financial flexibility.

CREDIT PROFILE

Guilford County is the most populous county in the Piedmont Triad region of North Carolina, with a 2015 population of 512,119 compared to 488,406 in 2010. The county encompasses two of the state's larger trade and population centers, the cities of High Point and Greensboro (GOs rated 'AA+' and 'AAA', respectively, both with a Stable Outlook by Fitch).

SOUND FISCAL POSITION

The county's reserve levels have remained strong and in-line with historical levels. Fiscal 2015 concluded with a 2.2% surplus bringing the unrestricted general fund balance to \\$112 million, or a solid 20.3% of general fund spending. Fitch expects balances to continue to be well above the county's reserve target of unassigned fund balance exceeding 8% of the subsequent year's budget. The county's reserve by state statute, which is primarily to offset accounts receivable, is a source of additional financial flexibility. This reserve totaled \\$45.2 million at fiscal year-end 2015, or an additional 8.2% of spending.

The county's fiscal 2016 budget was increased by \\$18.7 million year-over-year, or 3.3%, primarily due increased school and community college operating expenditures and debt service. The budget includes an appropriation of fund balance of \\$27.1 million, although the county has a history of very conservative budgeting. Year to date results for fiscal 2016 are positive.

Property tax revenue accounts for approximately two-thirds of total general fund revenue, providing a stable revenue base. The county retains revenue raising capacity with a tax rate of \\$0.76 per \\$100 in assessed value is well beneath the state cap of \\$1.50. Management projects that property tax collections will exceed the budget, which would be in-line with historically conservative budgeting.

TRANSITIONING MANUFACTURING ECONOMY

The county continues to expand the breadth of its economic base through the use of incentives and promotion of its quality of life, educational opportunities, and transportation infrastructure. Guilford County's economy has seen continued downsizing of its traditional furniture and textile manufacturing base. The county's unemployment rate (5.7% as of January 2016) has begun to recover since the onset of the recession and is now below the state average (5.8%), though still behind the national (5.2%). Wealth indicators for the county are likewise on par with the state but below national averages.

The local economy continues to grow through investment from industries including technology, life sciences, pharmaceuticals, warehousing and distribution, and aviation. Development of these sectors should add diversity and stability to the county's economic base. A good deal of growth is centered on the Piedmont Triad International Airport (PTIA) in Greensboro, where several companies have announced expansions in recent years including Honda Aircraft Co. The company delivered its first commercial aircraft, the HondaJet, in December 2015 and now employs 1,700 workers.

The county's education sector may also contribute to future growth. In particular, North Carolina Agricultural and Technical State University and the University of North Carolina at Greensboro were involved in the development of The Gateway University Research Park, which features a joint school of nanoscience and nanoengineering.

Housing prices are up 3.9% year-over-year and projected to increase another 3.3% in the next year, back to pre-recession levels, according to Zillow.com.

AVERAGE DEBT LEVELS WITH HIGH EXPOSURE TO VARIABLE-RATE DEBT

Overall debt levels are affordable at 2.2% of market value, but could rise with funding of capital requirements related to Guilford County Schools and Guilford Technical Community College. Amortization is rapid as 75% of outstanding debt is paid off within 10 years, which more than offsets the upcoming expected issuance. The capital improvement plan projects to issue up to \\$160 million in tax-supported debt for schools that was originally approved by voters in 2008.

Debt service was a somewhat high 13.6% of governmental spending in fiscal 2015, a measure that Fitch commonly employs. The county began exceeding its debt service policy (which targets debt service to not exceed 15% of the operating budget) in fiscal 2015, expects debt service to peak in fiscal 2018, and will regain compliance in fiscal 2019. The county is well below the state's statutory debt limit and Fitch believes future planned debt issuance is manageable based on the low current debt levels and rapid amortization.

As of March 1, 2016, the county's variable rate debt remained an elevated 23.8% of total debt outstanding, most of which is unhedged. The county conservatively budgets its variable rate cost of interest at 4.25% compared to actual rates under 0.1%, contributing to the favorable expenditure performances in recent years. Fitch will monitor the county's variable-rate exposure for pressure on the county's debt profile or on its financial flexibility.

LIMITED PENSION AND OPEB LIABILITIES

The majority of county employees participate in the well-funded North Carolina Local Governmental Employees' Retirement System (LGERS), a cost-sharing multiple-employer plan. The county also administers a single-employer pension plan to provide retirement benefits to qualified sworn law enforcement officers and a separate CSME plan for the county's retired registers of deeds. The county's total fiscal 2015 pension contribution was an affordable \\$8.7 million or a very low 1.4% of governmental spending. The county annually pays the full contribution required by actuaries, maintaining the unfunded liability to a very small percent of market value (0.01%).

Other post-employment benefit (OPEB) liabilities remain low with the unfunded liability at just 0.3% of market value. Fitch does not consider the county's OPEB liability as exerting pressure on its finances given the relatively small size of the OPEB cost (1.1% of spending). Furthermore, the OPEB plan was closed to new employees in fiscal 2010.

Total carrying costs including pension required contributions, OPEB actual contribution and debt service payments are a moderate 16.2% of governmental spending.